Steemit Crypto Academy Season 3| week4: Trading the Dynamic Support and Resistance| Homework task for @cryptokraze

While starting out with trading, my trading tutor introduced me to trend lines. How to mark and use them on the charts; these were used for marking out the support and resistance levels/zones. Support and resistance zones are watch areas in the market. Price respects these areas (Support and Resistance). Price may bounce off the support causing the price to head upwards and another incident price can bounce off the resistance level causing the price to head downwards. Trend lines can be used to demarcate these support and resistance levels.

Dynamic Support and Resistance are other forms of Support and Resistance that are demarcated on the trading charts using the Exponential moving averages (EMA). In dynamic support and resistance, as the price moves in a certain direction, the moving average also follows that same direction.

Dynamic Support on BNBUSD 15minutes chart

With Dynamic support, the price moves above the Exponential moving average and whenever it approaches the support line, it bounces off and continues moving upwards in an uptrend.

Example: On BNBUSD 15m chart below shows the 50 EMA acting as a dynamic support.

Dynamic resistance on LTCUSD 15minutes chart

With Dynamic resistance, the price moves below the Exponential moving average (EMA) and whenever it approaches the resistance line it bounces off the heads downwards in a downtrend.

The screenshot below shows the 50 EMA acting as the dynamic resistance.

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2 - Make a combination of Two different EMAs other than 50 and 100 and show them on Crypto charts as Support and Resistance. (Clear Charts Needed)

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A combination of 8 and 34EMA

I have combined two EMAs, the first moving EMA 8 and the slow Moving EMA 34. Price leads the way as all these follow its direction. Price respects the dynamic support and resistance levels where it bounces off the resistance and heads downwards in a downtrend and on other incidences it bounces off and heads upwards in an Uptrend. These can be used in placing buy and sell orders.

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1. Explain Trade Entry and Exit Criteria for both Buy and Sell Positions using dynamic support and resistance on any Crypto Asset using any time frame of your choice (Clear Charts Needed)

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Trade Entry Criteria

We can use the Dynamic support and resistance provided by the two EMAs 50 & 100EMA to make some buy and sell trade entries as shown below;

Buy position criteria - On BTCUSD 15minute Chart

• First and foremost, you will need to add two EMAs on the chart 50 & 34 EMA.
• Price has to be moving above both EMAs
• The price must touch the slower EMA 50 before proceeding upwards therefore it will require some patience.
• We will have to place a buy entry position at the point when the price is heading upwards. Note that there can be various buy opportunities. Having an early buy position is more profitable as it gives you an opportunity to ride the long trend.

Sell Trade position criteria - On BTCUSD 15minute Chart

• First and foremost add two EMAs 50 and 100EMA on the chart.
• Price has to be moving below both EMAs
• You need to patiently wait for the price to touch the 50 EMA before placing your Sell trade. This is just to be sure that’s it’s a valid setup having price heading below the EMAs.
• Place your buy trade just after price has touched the 50 EMA. You can as well use the knowledge of candlesticks as an entry trigger for your sell trade.

Exit Criteria

In trading, we exit trades on two conditions; when a trade is in profits or when a trade has gone against our decision in other wards in losses. We, therefore, have to set the Stop Loss and Take Profit. The following is the Exit Criteria for a Buy and Sell position using the Dynamic Support and Resistance.

Exit Buy position - On BTCUSD 15minute Chart

• First and Foremost, set the stop loss to save your funds just in case the trade goes against your trade decision.
• You will set the loss just below the 100EMA. The trade set-up will be invalidated when the trade crosses the stop loss level, you will therefore have to exit the trade and wait for another trade set up.
• You will have to set a take profit target for a trade that has gone in your favour.
• Set the take profit on a 1:1 Risk to reward ratio to cater for the trade that is your favour and when price hits the take profit target, proceed by booking your profits and exit the trade.

Exit Sell position - On BTCUSD 15minute Chart

• First and Foremost, set the stop loss to save your funds just in case the trade goes against your trade decision.
• You will set the loss just above the 100EMA. The trade set-up will be invalidated when the trade crosses the stop loss level, you will therefore have to exit the trade and wait for another trade set up.
• You will also set a take profit target to cater for a trade that has gone in your favour.
• Set the take profit on a 1:1 Risk to reward ratio to cater for the trade that is your favour and when price hits the take profit target, proceed by booking your profits and exit the trade.

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1. Place 2 demo trades on crypto assets using Dynamic Support and Resistance strategy. You can use lower timeframe for these demo trades (Clear Charts and Actual Trades Needed)

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Using the FxPro trading application on my phone, I placed 2 buy Demo trades for BTCUSD trading pair, both were based on a 1 minute chart as shown below;

Demo trade1 : BTCUSD - 1minute chart

I used Trading view for my analysis

I made a loss of $1.89 on BTCUSD pair on the 1 minute chart when the market price hit my stop loss level.

Demo trade 2: BTCUSD - 1minute chart

I made a profit of $4.20

Trading in 1 minute is super fast and requires very quick decision making. I was still setting up my take profit and stop loss level, I then realized a quick spike in price which made me $4.2. I was quite lucky there but all in all I was trading following the dynamic support and resistance. Looked for a good buy opportunity as I saw that price was above both the 50 and 100EMAs.

In conclusion, trading the dynamic support and resistance using the 50 and 100 EMA can really fetch some good returns to a trader if the conditions of the strategy are carefully observed.

Cc: @cryptokraze